India has zero probability of slipping into recession, says survey

India is one of the select countries that has a zero probability of facing a severe economic slump

 

 

 

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Global pandemic, a war between two nations and a breakdown in the supply chain system resulting in sky-high inflation rates has put economies of most countries in doldrums. Even superpowers like US, Japan are at the risk of a recession. However, India is one of the select countries that has a zero probability of facing a severe economic slump.

The latest Bloomberg survey of economists forecasted the risk of recession in some Asian economies such as India, Sri Lanka, South Korea, Vietnam, and Thailand. The survey revealed that the percentage of recession in India is Zero while Sri Lanka topped the recession chart with 85 percent of the risk. The sharp tumble in fortunes of the island nation is a marked departure from the 33 per cent chance recorded last year.  Sri Lanka is followed by New Zealand (33 percent), South Korea (25 percent), and Japan (25 percent).  The survey showed a 20 percent probability of China slipping into a recession in the next one year, and a 20 per cent likelihood that Taiwan will enter one. Economists also see a 20 percent chance that Pakistan will enter a recession. Overall, Asia faces 20-25 per cent chance of witnessing a recession in the next one year. However, Asian economies have largely remained resilient compared to Europe and the United States.

Europe and US worst hit

Europe and US will be the worst hit according to the survey. Odds of the US entering it is around 40 per cent. Europe has a 50-55 per cent risk. Surging energy prices have hit countries such as Germany and France the most, with a spillover effect impacting the rest of that region.

United States is staring at one of the worst periods of recession post 2008. It is pertinent to note that the inflation rate in the US increased by a whopping 8.6 per cent in May 2022, reaching a forty-year high. Inflation in the UK is 9.1 percent in June and in Euro Zone inflation is at 8.6 percent.

Global growth is forecast to slow to 3.0 per cent this year followed by 2.8 per cent next, both downgraded from 3.5 per cent and 3.4 per cent in the last quarterly poll in April. That compares with the International Monetary Fund's latest forecasts of 3.2 per cent and 2.9 per cent. Of the 48 economies covered, 77 per cent of growth forecasts were downgraded for next year with only 13 per cent left unchanged and 10 per cent upgraded.

India seems to have braved the storm

CPI inflation in India, though higher than RBI’s upper band, is lower than inflation in developed economics. CPI inflation has declined from 7.79 per cent in April to 7.04 per cent in May to 7.01 percent in June. This downward trend can sustain, given the recent sharp decline in commodity prices. Most of the economic indicators have shown good recovery. We are safe to say that India’s domestic economic factors are positive that can insulate India from any major negative impact of a global adverse economic event.